Question

A, B and C were in partnership sharing profits and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31st March, 2024 was as follows:

Liabilities	₹	₹	Assets	₹	₹
Capital Accounts:		44,000	Plant & Machinery		30,000
A	18,000		Furniture		15,000
B	16,000		Trade Debtors	35,000	33,000
C	10,000		Less: Provision	2,000
Trade Creditors		33,000	Cash in Hand		1,000
Workmen’s Accident Compensation Reserve		5,000	Profit & Loss A/c		3,000
		82,000			82,000

C retired on this date. It was agreed that:

1. Plant and Machinery is to be revalued at ₹ 40,000; the existing provision for bad debts is to be increased by 50% and liability for workmen’s compensation was decided at ₹ 2,000.
2. Creditors are to be paid ₹ 3,000 more.
3. C’s share of goodwill was valued at ₹ 8,000.
4. The total amount payable to C was brought in by A and B in such a way as to make their capital accounts in proportion to their share of profits which is to be equal.

You are required to prepare (i) revaluation account, (ii) partner’s capital accounts, and (iii) revised balance sheet after all adjustments are carried out.

Answer 1

Dr.	Revaluation A/c			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Creditors A/c		3,000	By Plant & Machinery A/c	10,000
To Provision for Bad Debts A/c		1,000
To Profit t/f to Capital A/cs:
A	3,000
B	2,000
C	1,000	6,000
		10,000		10,000

 

Dr.	Partners’ Capital A/c						Cr.
Particulars	A	B	C	Particulars	A	B	C
To Profit & Loss A/c	1,500	1,000	500	By Balance b/d	18,000	16,000	10,000
To C’s Capital A/c	-	8,000	-	By Revaluation A/c - Profit	3,000	2,000	1,000
To Bank A/c	-	-	19,000	By Workmen’s Accident Compensation Reserve A/c	1,500	1,000	500
To Balance c/d	21,000	10,000	-	By B’s Capital A/c	-	-	8,000
	22,500	19,000	19,500		22,500	19,000	19,500
To Balance c/d	25,000	25,000	-	By Balance b/d	21,000	10,000	19,000
				By Bank A/c	4,000	15,000	-
	25,000	25,000	-		25,000	25,000	-

 

Balance Sheet
Liabilities	Amount (₹)	Amount (₹)	Assets	Amount (₹)	Amount (₹)
Trade Creditors		36,000	Plant & Machinery		40,000
Workmen’s Accident Compensation Reserve		2,000	Trade Debtors	35,000	33,000
Capital A/cs:		50,000	Less: Provision for bad debts	3,000
A	25,000		Furniture		15,000
B	25,000
		88,000			88,000